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11 April 2025 - Special Market Update - Reasons for the U.S. Tariff Pause - What Vietnam and Cambodia are Doing

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11 April 2025 - Special Market Update - Reasons for the U.S. Tariff Pause - What Vietnam and Cambodia are Doing
B2B Cambodia Special Market Update - Reasons for the U.S. Tariff Pause - What Vietnam and Cambodia are Doing - 11 April 2025

This is a B2B Cambodia Special Market Update on 11 April 2025 reviewing the reasons for the U.S. tariff pause and what Vietnam and Cambodia are doing,

Watch the video in English above.

  • The White House announced a 90 Day Tariff Pause , which came less than 24 hours after steep new tariffs kicked in on most trading partners, dramatically reversing course by dropping country specific tariffs, except on China. 
  • Mexico and Canada are still subject to 25% tariffs on goods that don’t comply with the U.S.-Mexico-Canada Agreement, as well as the 25% tariffs on steel and aluminum and foreign autos, however are not subject to the 10% tariffs that will now go into effect for goods from other countries. 
  • During the 90 days, the 10% baseline tariff  which came into effect on 5 April remain in place. 
  • The exception is China, as trade tensions are escalating.  The White House announced an immediate increase in tariffs on China to 125 per cent, up from the previously declared 104 per cent. Beijing had announced a reciprocal 84% tariff rate on U.S. goods, effective April 10.
     
  • There are several reasons as to what triggered the pause. 
  • The number 1 reason is most likely the financial markets, in particularly the sell-off in the U.S. Bond market. The bond market is where the US government borrows money by selling Treasury Bonds. When there is a  sell off of bonds, the price goes down, the yield, or interest rates go up, and the cost of borrowing spikes. That increases the cost of borrowing for the U.S. which is now U.S. 892 billion in 2025, or 3.1% of GDP. U.S. Treasuries are considered the safest debt, in times of uncertainty . They are valued as a safe haven where investors park money at times such as the 2008-2009 financial crisis, the Covid-19 pandemic, and when new economic challenges such as tariffs, emerge.  It is believed that foreign governments were selling U.S. Treasuries. 
  • The 30-year Treasury yield marked its largest three-day yield increase since the pandemic, the 10-year yield’s three-day gain was the biggest since the summer of 2022. The 30-year yield rose 0.072 percentage points, and the 10-year yield climbed 0.151 points on Wednesday. These are some of the most watched bonds, as they are the basis for rates on mortgage, credit cards, and other borrowing in the world’s largest economy.
  • As yields climbed, investors speculated that the ripple could cause a financial crisis. The price action in the bond markets was termed wide and choppy with an absence of liquidity, causing concern of the stripping away of safe haven status and signaling that confidence in the US economy was shaking.
     
  • Besides the drop in the bond market, U.S. stocks dropped more than 18% since the inauguration and the markets lost USD 10 trillion in global equity value, more than the GDP of 50 countries combined, the 3 days since the tariffs on 180 countries were announced. The U.S S&P 500, a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States, suffered its deepest loss over four days since the benchmark’s creation in the 1950s. Om January 17th the S&P 500 index was 5,997 and on April 8th it was 4,982, down 17%.  
  • The market drop saw a sweeping wipeout of investor wealth, including retirement and savings accounts.  Investors also became nervous that a prolonged trade war poses significant risks for corporate profits and the U.S. economy.
  • After the announcement of the pause, US stocks immediately surged, posting a historic rally. The Dow skyrocketed 2,963 points, or 7.87%. The S&P 500 shot up 9.52%. The tech-heavy Nasdaq soared 12.16%.
  • In the end the markets were the guardrails. A growing alarm inside the U.S. Treasury Department over the developments in the bond market was the main factor that made administration hit a pause on the reciprocal tariff regime.
     
  • Another factor was an acceleration of government and industry voices, including billionaires, speaking out against the tariffs.  
    In particular to note,

Jamie Dimon: The JPMorganChase CEO told the media he thinks a recession is a “likely outcome” of tariffs, “I think it could get worse if we don’t make some progress here”, saying tariffs “will likely increase inflation and are causing many to consider a greater probability of a recession.”

 

  • Elon Musk: The Tesla CEO shared a video early Monday of economist Milton Friedman touting free trade and the benefits of importing goods and reportedly lobbied the president personally not to impose the tariffs, He was also sparring with the U.S. president’s top trade adviser for praising tariffs—most recently saying Tuesday he is a “moron” who’s “dumber than a sack of bricks”—and Musk’s brother (and Tesla board member) Kimbal Musk has criticized the tariffs as a “permanent tax” on Americans
  • Bill Ackman: The hedge fund manager and longtime supporter of the U.S. President, repeatedly spoke out against the president’s tariffs, calling Tuesday for the White House to issue a 30, 60 or 90-day pause on the tariffs “to enable negotiations to be completed without a major global economic disruption” and saying Wednesday morning the financial chaos tariffs have sparked are “not the markers of successful policy” and “many small businesses will go bankrupt” if they’re not paused soon.
  • Other factors were fear of a recession and the outpouring of countries to negotiate.
     
  • Vietnam is an excellent example of a country taking immediate action on the tariff negotiation front. Vietnam has emerged as a manufacturing hub for many companies that sell goods in the U.S., including multinational consumer goods retailers such as Nike, Adidas, and Apple Inc, because of a blend of relatively cheap labor costs and supportive government policies.  Since the last U.S.-China trade war erupted during the President’s first term in 2018, many Chinese manufacturers have also moved their production to Vietnam to avoid U.S. tariffs.  Vietnam’s trade surplus in goods with the U.S. more than tripled to a record high of $123.5 billion last year from less than $40 billion in 2018, according to U.S. data which pegged Vietnam’s goods exported to the U.S. at $136.6 billion in 2024.
  • Vietnam and the US agreed to start negotiations on a “reciprocal” trade deal, with the breakthrough coming just hours after the President announced a 90-day pause on higher tariffs.  The Deputy Prime Minister Ho Duc Phoc has alread met with US Trade Representative Jamieson Greer in Washington.  The two sides agreed to consider minimizing “non-tariff barriers to each other’s goods” as well as strengthen “coordination to control and prevent acts of trade fraud.” 
  • Vietnam was among the first countries singled out by the U.S. President for showing willingness to negotiate over the tariffs following a phone call between the US leader and Communist Party chief To Lam last week.  Vietnam is also trying to narrow the trade gap and push U.S. business. Phoc is also expected to meet SpaceX executives, during which a permit to operate Starlink internet services in Vietnam for a pilot period is set to be granted.  Phoc also rushed to the US capital from New York to witness the signing of a Vietnam Airlines memorandum of understanding with U.S. bank Citibank to secure at least $560 million to partially finance what’s expected to be Boeing Co. plane purchases. VietJet also signed a $300 million financing agreement with AV AirFinance to help fund its fleet expansion.  Prime Minister Pham Minh Chinh said that Vietnam is working on US concerns about non-tariff barriers and reiterated that the government will seek to boost purchases of US goods, including national security and defense items, while accelerating deliveries of contracted commercial aircraft.
     
  • Cambodia is also coming to the negotiating table.  Prime Minister Hun Manet has responded by reducing 19 tariffs on approximately 85 US goods from 35 percent to 5 percent and release of two letters to the US requesting negotiations. In a letter to the U.S. President, Prime Minister Hun Manet offered “to negotiate with Your Honorable’s administration at the earliest convenient time”  Additionally the Prime Minister said that he has tasked the Minister of Commerce to coordinate with the US Trade Representative, adding that Cambodia remains fully committed to engaging in constructive and productive dialogue with the US government  “It is to further deepen our bilateral trade, so that both nations and peoples can enjoy the tangible benefits from these significant trade relations.”  
  • On April 10th the Prime Minster created an Establishment of Cambodia-US Bilateral Trade and Investment Relations Working Group for the coordination of Cambodia-US bilateral trade and investment relations lead by Deputy Prime Minister His Excellency Sun Chantol and  Her Excellency Cham Nimol, Minister of the Ministry of Commerce. 
  • The challenges for Cambodia are  its export-driven economy  with total exports accounting for 40 percent of the country’s GDP, of which shipments to the United States account for 27 percent, transshipment from Chinese established factories in Cambodia for tariff avoidance, the large trade deficit wit the U.S. of USD 16.3 billion where Cambodia imports USD 322 million from the United States and exports USD 12.67 billion, and perceived market barriers.